Which type of economic analysis is used to compare costs and benefits by assigning a monetary value to all outcomes?

Which type of economic analysis is used to compare costs and benefits by assigning a monetary value to all outcomes?

• A. Cost-benefit analysis
• B. Cost-minimization analysis
• C. Cost-utility analysis
• D. Budget impact analysis

Answer: (A)

Assigning a monetary value to all outcomes to compare costs and benefits is cost-benefit analysis. In this approach you identify every relevant cost and every relevant benefit over a defined time horizon, assign a dollar value to each, and then bring future values back to present terms through discounting. By summing all monetized benefits and all monetized costs, you get a net benefit (or a benefit-cost ratio). If the net benefit is positive (or the ratio exceeds one), the option is economically favorable. This method can include intangible effects, like improved health or reduced wait times, by assigning them monetary values, though that monetization can be challenging and politically contentious. The key idea is to compare totals on a single monetary scale so the decision rests on whether benefits outweigh costs. Other analyses take different approaches: cost-minimization assumes outcomes are effectively the same and only compares costs; cost-utility uses a utility measure (like quality-adjusted life years) rather than dollars; cost-effectiveness compares costs to a natural unit of effect (like cost per life-year gained); budget impact looks at affordability within a specific payer’s budget and does not necessarily monetize all outcomes.

Assigning a monetary value to all outcomes to compare costs and benefits is cost-benefit analysis. In this approach you identify every relevant cost and every relevant benefit over a defined time horizon, assign a dollar value to each, and then bring future values back to present terms through discounting. By summing all monetized benefits and all monetized costs, you get a net benefit (or a benefit-cost ratio). If the net benefit is positive (or the ratio exceeds one), the option is economically favorable.

This method can include intangible effects, like improved health or reduced wait times, by assigning them monetary values, though that monetization can be challenging and politically contentious. The key idea is to compare totals on a single monetary scale so the decision rests on whether benefits outweigh costs.

Other analyses take different approaches: cost-minimization assumes outcomes are effectively the same and only compares costs; cost-utility uses a utility measure (like quality-adjusted life years) rather than dollars; cost-effectiveness compares costs to a natural unit of effect (like cost per life-year gained); budget impact looks at affordability within a specific payer’s budget and does not necessarily monetize all outcomes.